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Gas prices could keep dropping -- if, if

July 26, 2008|Ronald D. White and Kimi Yoshino | Times Staff Writers

Gas prices at service stations in Southern California began sneaking below $4 a gallon this week as falling oil prices worldwide and lower demand started to make a difference at the pump.

And this may be just the start of a wave of somewhat lower gasoline prices heading our way, experts said.

"We could be seeing the start of something really big -- if we have no major new problems in the economy and if we can avoid major hurricanes," said Phil Flynn, vice president and senior market analyst for Alaron Trading Co. in Chicago. "We are really seeing a contraction when driver demand usually grows, and that is huge. With demand being so weak and supplies plentiful, it's taking a toll on prices."

In Los Angeles, Pasadena and Bell Gardens, stations lured customers at $3.99 or even less for a gallon of self-serve regular and the tantalizing prospect of long-sought relief. Similar price cuts were showing up across the state.

At times, the response was frantic. Lanes were blocked sporadically at the Speedy Fuel station on Eastern Avenue in Bell Gardens. Assistant manager Eric Salcedo said his $3.99 gas drew customers from as far away as San Bernardino County, Valencia and Escondido.

"We're getting a lot of business," he said, recalling arguments and fistfights that nearly broke out.

Jacquelene Montano, 43, took one look at the sign advertising unleaded for $3.97 at Garo Gas in Pasadena and practically stopped in her tracks: "Oh, my God, this is great!" she said. "We turned around."

Montano, a nursing assistant, said her son lived near the station on Washington Boulevard. And because she works close by -- and the station is offering gas for $3.98 a gallon over the weekend -- she said she was likely to come back again.

High pump prices have forced Montano to cut her expenses. "I don't go to the salon like before," she said.

Daisy Costante, 22, of Duarte stopped at the same station after a friend she was visiting told her about the cheap gas. Costante said she called up her parents. On Friday afternoon she pumped $35 worth into her Toyota Tacoma.

"I haven't filled up all the way in a long time," Costante said.

Gas below $4 a gallon is a traffic stopper. But at AAA, officials have seen a slow but steady drop for five straight weeks. "And by as much as a dime just in the past week," said Elaine Beno, a spokeswoman for the Automobile Club of Southern California.

The average price for regular gasoline in California and around the nation Friday remained significantly higher compared with a year ago but still reflected the biggest drop of the year.

In California, the average had fallen 23.6 cents to $4.374 from the all-time high of $4.610 on June 19, according to the AAA Fuel Gauge Report.

Nationally, the average fell to $4.006, which was 10.8 cents off the record set July 17.

Many factors account for the change, including conservation and hurricanes.

"Everything we hear anecdotally from our members suggests that more of them are riding trains and buses or carpooling or riding motorcycles or bicycles to work," said the Auto Club's Beno.

Luck helps too, said John Kilduff, vice president of risk management at the New York trading firm MF Global, noting that Hurricane Dolly this week skipped past petroleum facilities in the Gulf of Mexico. "I've never seen a hurricane do that before. Consumers really caught a break on that," he said.

According to the most recent data available, Californians burned 43.5 million fewer gallons of gasoline in March than they did during the same month in 2007.

Flynn, the Alaron analyst, said gasoline demand had fallen 2.2% nationally in the middle of the summer driving season, a time when demand normally rises 1% to 1.5% or more. The drop was reflected in the Energy Department's weekly petroleum report Thursday that showed U.S. gasoline stocks at 217.1 million barrels. That was more than 13 million barrels more than in the same week in 2007.

"If this keeps up there is no reason why prices can't drop as fast as they climbed," Flynn said, adding that the California average could fall below $4 a gallon and the national average could drop to $3.20 to $3.50.

At the Super Petrol on Venice Boulevard in Culver City, owner Aziz Taghizadeh offered gas at $3.99 on Thursday -- and plans to repeat the sale weekly -- though market forces made him bump it back up to $4.29 on Friday, he said.

About 3,000 customers rolled past his pumps Thursday, compared with 400 or 500 on a typical day, and bought as much gas in one day as Taghizadeh might usually sell in a week.

Taghizadeh, who has owned the station for 25 years, said he was happy to make his customers happy and didn't make much more of a profit. Of course, he didn't win any friends among competing stations.

"Two or three gas companies called me and said, 'Why are you selling at this price? My business is bad today,' " Taghizadeh said.

"But I like to keep the customers happy."

After one customer lamented missing his sale by one day, Taghizadeh told her he would try to run the special again.

"I'm definitely going to be looking out for that," said Carolyn Ordonez, 25, who works as a personal assistant and is unable to fill up her Mercedes very often.

"I'm budgeting on everything," said Ordonez, of North Hollywood. "Everything revolves around gas prices."


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